sharpton? >> i don't think anybody does. he is the king of quid pro, quo. >> i'm jon scott. see you next week. >> john: it's not that people don't know. the battle is over all television. people know the president but do they know his opponent.

>> you are spending more money than taking in you need to spend less of this. who is this guy? do you know who this is? yes, of course. >> john boehner. >> lots of people didn't know him. >> i don't know who that is. >> or anything about the debt problem zbloojtsd what is the debt limit. what are they fighting about? >> i don't know. >> okay, tonight we'll explained and we'll talk about the debt. it's into the hard. the debt and the stossel solution. that is our show tonight.

>> john: look at that, they need more? if they don't get more money they won't be able to send social security checks and pay veterans' benefits our veterans deserve. really? isn't $2 trillion isn't enough? they can pay social security and medicare and the interest on the debt and still have hundreds of billions left over. two trillion is plenty. it's billions more than our entire government spends when president bush took office. what is the problem? the problem is that republicans and democrats under presidents bush and obama doubled spending, doubled it. this year the government plans to spend $3 trillion, $800 billion. look at that in up that is

reason we have a growing debt. president obama says we need to raise taxes to cover that. i don't think so. it's the spending that is the problem. this chart shows how much this administration has spent adjusted for inflation. spending rose during every administration. then exploded under presidents bush and obama. so because of those increases the president says we need to increase revenue. no way says grover nor quist who heads americans for tax reform. some say it's because of you and your pledge. >> i think there isn't a tax increase on the table is that 235 members of the house of representatives never to raise taxes, 41 senators did. so we have quite a number of house in the senate and many of them elected by tea party cycle.

>> john: you went to them and said, hey, don't you want to sign this? >> absolutely. we share it with them. political activists and tea party activists. if you are in office, will you commit in writing, not in a speech with two witnesses, not that we don't trust anybody, but we have two witnesses and it's dated. we make many copies. we wanted to make sure those people take the pledge and voters know they intend to keep it. >> john: at the start of the show i played clips of people outside the studio, what is that? in fairness, the majority of people have some idea. some like this young woman were pretty informed. >> what are they fighting about? >> they are fighting about the debt limit. the republicans want to not have any taxes governor nor quist made him sign all this stuff and

they can't look like idiots. >> john: so randomly this young woman on the street. republicans want no tax. >> no tax increases. >> john: that is what she meant but republicans wanted no taxes. >> we go with lower taxes. we can work on pushing the envelope. we'll start with not increasing the tax burden. step one, don't raise taxes. step two, bring taxes down but only if you take tax increases off the table do you begin to have conversations about spending restraint. they drop it by $6 trillion. nice step in the right direction. over ten years and most recent plan is $2.35 trillion spending reduction from obama's higher level. >> john: none of these are real cuts. cuts in the projected increase. >> things are getting bad and

they are worser sooner. we need to reduce the damage that is being inflicted. unless you say no to tax increases you won't begin to focus on spending. that is what obama wants to keep our focus off of. he wants to talk about the deficit and not spending. >> john: he won against you in some way. a lot of things you call tax increases were kind of loopholes that went to private jet makers and the oil deletion allowance. it sounds like a special break for rich business. >> there are two reasons we want to eliminate a lost deductions and credit. one is you want to simplify the code and take a lot of on goods. green lobby gives tax credits to pixie dust energy. they call them alternative

energy. >> john: you are fine in getting rid of these things? >> as long as you reduce tax rates and it's not a hidden tax increase. >> john: let's talk about the constant increase in spending, makes me thinking of a cocaine user, needing more coke to get high. >> america can learn a lot from the drug addicts. even though were $14 trillion. washington raised ten times in the last years. it's another spending hit. to borrow less you need to spend less. washington can learn a lot from drug addict. >> john: that was an ad made by gretchen hamil. what is the group and what is it doing. >> it's research and wants to educate the american public on the crisis we're currently experiencing and all things about economics and what happens inside the beltway. we tried to put it in simple terms that average americans can understand like a drug addict. >> john: are you one of grover's

tax cutting front groups? >> no, i lot of republicans wish we were a group like that. we're an organization all different political stripes to make sure we get the economy back on track. we inform the american public what is happening when it comes to government spending and the economy. >> john: you are doing some clever things. i see you are paying to put this message on buses in washington, d.c. can we put that up? bankrupting america.org. >>. >> we wanted to draw that distinction what is happening here and what is happening overseas and we can see hang around the world so people can understand it. this is a very real problem that we're going through right now. we also want to try to do it in unconventional ways, sending valentine's to capitol hill on

the day the president releases the budget. we want to make sure constituents and everybody is educated. >> john: it's our own greek tragedy. greece is a useful model because you can see the riots. most of the people can't see it. so you have your ads. to breaking news to report to you at this hour. senate majority leader harry reid is speaking on the floor. we want to take you there live to here what he has to say as the showdown on the debt ceiling goes on. >> it allows us to increase the debt ceiling by $4.5 trillion. its fair piece of legislation. if they think it can be improved let us tell them how they can be improved. they have until midnight to do it. thank you.

(at the inaudible) i have trouble understanding that myself. why for days we have received no response from the republicans. why this has not been willing to work on us what most feel we renecked on what they wanted. as i indicated yesterday. take your chips and go home. you've won, i said to fred thompson. i don't know. i don't know. i didn't schedule it. i sent a note and said i would be down here.

>> let's take those one at time. balanced budget amendment. that is one thing that senator mcconnell has talked about lots of times. we don't have no with a balanced budget amendment. we have one our side that mark udall has worked on. if they want a balanced budget vote we want to have one. it seems odd to me, however, for something as important as this to get the bare majority they got in the house yesterday, they put in their bill that you have to actually pass a constitutional amendment before they will allow the debt to be increased. that is a little extreme. we're happy to have a vote on balanced budget amendments. we had them before. on your other question -- we've

had two wars that this administration didn't start either one of them. we don't need to go in to the wars. i haven't been a big fan of iraq war. that war was cost us almost $2 trillion. the afghanistan and iraq war is winding down. office management of budget office has looked at this and said if you take a trillion dollars and lower the debt and allow us to take additional $200 billion in interest savings, that is what we have in our bill. it's all been done by non-partisan congressional budget office. i can't imagine the fact they have voted for it, 230 republicans voted for that in the budget.

40 republicans voted for it. why is it something suddenly they don't want? (question is inaudible). >> your math is terrific. we got 60. the issue has been for a week or so a trigger. yes, the joint committee doesn't come up with a result. what should happen. we've been willing to say that we're happy if we don't arrive at the budget goals with the joint committee that certain things should happen. we've been willing to say that there could be a sequestration

as long as it included revenues. it's unfair to make it a spending bill when we have billionaires and millionaires and corporate jets and yachts. the american people agree with us. the polls, democrats and republicans there should be shared sacrifice. that was what our bill was called. we're happy to have a trigger but they can't keep turning away their head there should be shared sacrifice. this will be the last question. >> the colonel lo question i had with the senator on the floor today. he complained he was called dooltd white house and he told the president. let us work this out by ourselves.

today he has changed his mind. he wants the president involved. the president has been involved. he told us and i said this on the floor with a republican and democratic leaders in the cabinet room of the white house. he had been there a long time. he said i have spent more time, i have spent more time dealing with this raising the debt ceiling than all the other presidents combined. so he has put in the time. ronald reagan had the debt increase during eight years as president 18 times. he didn't spend ten minutes with members of congress getting the debt ceiling raised. it was not an issue. it was an issue with tea party driven republican congress. pardon me? >> senator mcconnell said he

wanted to be part. the president has always been fully willing to be engaged. thanks. >> heather: you've been watching a senate majority leader democratic leader harry reid speaking there live as his bill was rejected by the republican led house by a vote of 1246, no, to 176 yes. not -- 246, no. >> many are calling this a tit-for-tat. a symbolic vote because this was real a mirror image of the reid bill. now anyone's guess what is next. more debate to follow as a compromised bill is expected to be reached hopefully voted on before the weekend is out so we all reach the august 2nd deadline. there is a live look for you in the house once again.

reid's bill has been voted down by a vote of 246, no, to 176 yes. now we return to stossel. we'll be back at the top of the hour. >> john:. it's the biggest perpetuated of gamblers. >> in the "wall street journal" you said these ideas should on this table along with spending cuts if we're to break free of the rhetorical shackle that has prevent cutting the deficit. so he did say along with spending cuts, what would you cut? >> you are going to tell me in the second part of your program. let me say in all of the proposals, reid, boehner, what

obama has talked about, trillions of dollars in cuts. so we're not defining which agency will be cut. i have a bill that reduce the mintage of coinage, many of party we should cut military expenditures. there is a lost areas for cuts. i probably agree or disagree with some of recommendations but that is a given and we need to can you tell our government spending. >> john: i'm glad you have specific cuts in mind. we look forward to hearing those at another time. >> my next guest cutting spending isn't just smart, it's the moral thing to do that. is next. is loaded with protein! really? 25 grams of protein. what do we have? all four of us, together? 24. he's low fat, too, and has 5 grams of sugars. i'll believe it when i--- [ both ] oooooh...

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>> john: look at that number. that is what congress says it needs to spend this year. give me a break. 3 trillion, 800 billion dollars. president obama talked about taking a scalpel to the budget. no, we need something bigger than that. we need to make huge cuts.

i'll cut the deficit down to surplus is when i or others talk about making significant cuts. i hear scathing criticism. >> don't rush stossel. he is nothing but a corporate shill. >> john: okay my producer made it as a joke. anyone who proposes cuts to the budget is branded cruel. one person says cutting that down isn't economically smart. it's the moral thing to do. arthur brooks of the american enterprise says that. what do you mean it's the moral thing to do? >> when the other side talks about doing the moral things. it's only fair for rich people to pay more. it's only fair that we take from people who have more in society

and unfair to actually cut programs, especially if they would affect anything less than average incomes. >> that resonates with people. there is a lot of money, redistribution is the moral thing to do. >> sure. in truth. that sounds good until you start thinking about what most americans think what fair is. redistribution is not the definition of fairness to most americans. most americans think that fairness has do with keeping what you earn. that doesn't mean you have to penalize four people or take money away from those that don't have enough. but it's not fair to take more away from people just because we can. we are robbing our future because we have a spending disorder in our government it's really immoral to be stealing away from future generations, pursuit of happiness simply because we can do that. the government today is treating

american citizens like atm machines. >> john: you said in the op-ed when you withdraw money from citizenss against their will you make them less free? >> yeah, sure. the state needs to to function. we need to have taxes to pay for government. we all know that. the question is, how much do we need for how much government that we actually want as a society. the government goes way beyond what we need to fix certain market failures, way beyond to create a safety net for the economically vulnerable. it has all kinds of middle-class welfare. that sounds like a good idea. why not, a few bucks here or there? that is really what they were talking about the road to

serfdom. a little abridgements to the freedom of the people. you work hard and they take it away. >> john: it changes the culture when people become dependent. people say it's immoral to take it from people. people also say, what is moral about taking the money that government gives to poorer people and limiting that. religious advisor to obama says the debt debate is clash between two competing moral visions, those that believe in the common good versus those that believe in individual good is the only way. the bible says we should be wary of the rich and defend the poor? >> i agree. its clash of moral visions. one side it's moral for the government to be bigger and taking more away and redistributing wealth between people. the other moral vision is that

people should be able to be free. i likes the founders of the united states and their concept of what a moral society was. if you go back to 1776 the declaration of independence, originally was going to say we have unalienable rights, life, liberty and possession of property. they put in pursuit of happiness possession of property is not moral enough for the moral nation on the face of the earth. basically you say if you want to stop cultural problems and solve problems with poverty you do it with a welfare check and you call it social justice. that is most materialistic philosophy possible. >> i love the phrase social justice they argue. if i resist, does that mean i'm for social injustice? i still don't quite get how i

answer these people when they say, you can't pursue happiness if you are horribly poor, if you are sick. we need government to help those people. we have to do more because there are still poor people. that is the moral thing to do. hyek, once again, economists knew that we need a basic safety net. anybody that says gets rit of all government programs is crazy. they are not paying attention to what we need. it goes beyond help for the vulnerable. i want to help the vulnerable, too, but i don't want middle welfare. i don't want forced sharing. morality comes when people voluntarily above basic poverty, when people help each other voluntarily. voluntary charity doesn't happen when government redistributes too much income. we know that from the europe and

soviets. a lost it has to do with the fact we believe that individuals need to make these choices. we have to get away from this idea if you believe in limited government. if you believe the moral thing is rewarding merit and entrepreneurship and unfair to force people to pay that the state needs to function that somehow you hate the poor. no, i want to help the poor with a minimum basic standing of living and where everyone can rise. your ancestors came from that, not for forced income distribution. >> john: thank you mr. brooks. if you remove the government safety net, it's okay with me, i think a private safety net and do it much better. next, what if we do keep piling on the debt, can't pay our bills? that has already happened on a

small scale here in america and we'll show you where and when, next.

a press circumference not a plan. >> i hope republicans wake up. >> the president wants us to help pay for his spending binge. >> the republicans in the house refuse to consider this balanced approach. >> i think the president should apologize. >> the debt ceiling is being held hostage. >> john: what if they don't work it out? they run out of money. pay the military and help the poor or medicare and social security. no, because the federal government can print the money. when they do, each bill decreases in value. eventually this becomes nearly worth less. it's equivalent to the

government going bankruptcy, being unable to pay your social security check. what would that look like? it has already happened. in pritchard, alabama. >> this woman is angry because her husband worked for the city for 32 years. he held up his end of the bargain. but the city didn't send him a mention check for more than a year. the city council says we don't have the money. an accountant warned that you will run out of money and the politicians did nothing. they admit it today. >> right on schedule in 2009, they declared bankruptcy and just stopped sending pension checks to retired city employees. more than a hundred of them. >> they didn't do anything they

were supposed to do. they didn't pay us like they were supposed to. >> alfred are rertd from the pritchard fire department after working 35 years for the city. he had hoped to relax and travel. so when the checks stopped coming, now at age 66 he is a security guard at a local mall. >> alfred arnold joins us and steve malanga. you had to get a job as a security guard? >> oh, yeah. >> you thought you were going to get a pension from the city and it wasn't there? >> not there. i have to go to work, 40 hours a week, it's like starting all over again. >> john: another person, williams, 77 years old was lucky to get a job as a school teacher? >> yes. >> john: it's not like the town has no money. they are mayor $100,000. they have a housing authority with 40 government workers.

they knew this was going to happen. f had knew this was going to happen, you would have prepared for this? >> the city won. steve malanga, this is going to happen to more places? >> a lot of places are approaching this. whether they get bailed out by the states is an open question. but you have vallejo, california central falls rhode island. and cuts for retirees. so we are seeing this, absolutely. >> john: and cities and states unlike the federal government can't print money. >> that is for sure. >> john: in a way it's a goodies palestinian but it's people like you that suffer. >> the problem, the pension funds is not form of borrowing, it's just like debt. technically cities and states

can't run deficits. they choose to run them in the pension funds. politicians make promises. you want to fund my ira by borrowing my money from credit card now i fund but i owe this money on credit card. that is not funding my irar. another form of debt, hidden debt and that is what they are regularly on. >> john: but in richard, they had an accounting firm you are going to go probing in "x" years and they did nothing? they are supposed to be the responsible party. >> what happens when you get to the point where you say you are going broke in five years in the pension fund, the cost is so high that people just ignore it. you have a state like new jersey and ten years they barely made a pension into a system. they made liabilities, illinois they don't make payments in the pension, they borrow the money. that is what they do.

it keeps getting bigger and bigger. >> john: do they know it's going to be blow up? >> with the pension funds it's a long term problem. the accounting is very complex, way too complex, wall street can go. what happens they basically ride it out. all these people like new jersey connecticut and made pension problems in the 1990s that they can't pay for, most of those politicians are gone now. so it's a dysfunctional system. you make promises now that have to be paid for 10-20 years down in advance. >> john: they say new employees we're going pay you less, but in order to stiff the older employees -- as happened to you -- they have to declare bankruptcy and get reorganized by some judge. they say, okay, your city has a

golf course they're losing money on. >> they should sell that. >> john: and they are paying you a third of what they promised. are you happy with that? >> no, not at all. >> part of the problem is what you have to do is you have to do it in a way that fixes the system by reduces the cost for those people that are currently working so you can pay retirees. otherwise you have a situation we're going to save the system that are working now. >> john: is that happening? are they doing it? >> people are doing different things around the country. employees have to pay more. other states say let's raise taxes. there is not just one approach. one city, they instituted a kind of 401-k which basically ends the long term liability for the city.

put the money in right now for the employees. make sure everybody knows what is going in. cities are doing different things. some are responsible, not all of them responsible. again, it's just i will lose ear fixes. >> -- illusory if i cans. >> but in every time something similar. you look at new york city. my town, the say that new york city the pensions were $1.5 billion, it's $8.5 billion. >> in just ten years, it went from being 6% to 16% of the city's budget. that is happening around the country. basically if you think about that, something else has to be cut in order to just account for that. new york city is a good case. of a really dysfunctional situation. it's the state legislature that

dictates what the city pays but the city has to pay it. you find it, that is a really bad system because basically mandates coming down that the people at the state level are going to have to pay. >> john: it's all awful people like you but you seem pretty good-natured about it. >> certainly i'm ticked off about it. you have to understand they are starting a new program after we get rid of our pension, it's called the 3459, employees are going to put money in but the city is not. >> john: well, at least it will pay off if it's the employees' own money. >> coming up my solution to the horrible deficit. are you readying for cutting. i'm going to cut!

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>> john: we're back with your questions for grover norquist and steve malanga. specialist on governments and how they squander tax money. first from my facebook page,

eric asks, what is so horrible about default. why shouldn't creditors who choose to invest pay the consequences? give them a haircut. >> one of the problems is, it creates competition down the road, if you have foreign governments and pension funds are investing. you are asking them to take a haircut. so a government over time going to reduce debt but rely on debt for some time. if you stiff creditors you risk the fact they won't come to the well anymore. >> it's more than risk. they won't come to the well at the same time. >> even more expensive but the real risk is that some people will step out of the market almost completely and you can't finance all this debt unfortunately that we. >> have stephanie asks, i understand the debt has been raised many times.

why what is different? >> in past times they have raised it they had some restraint on spending or some reform. so it's not unreasonable to ask for that but the size of the debt ceiling is larger than we've seen so far. it's coming so soon because spending that is what is shock together system. >> john: and history. it used to be that the congress had to approve every treasury bond. now, we are borrowing so much, they can't do that and started setting limits. some say it will be a disaster not to vote the debt ceiling. >> we would risk sparking a deep economic crisis. >> john: people forget a similar crisis happened in 199. a remember that one? president clinton and congress couldn't agree on a budget so

the government shut down twice, second time for three weeks. a million government workers were told don't come to work. so did the economy grind to a halt? did you even notice that couple departments were doing the useful useless stuff they do. >> stock market went up and then it recovered. today despite all the screaming, we must raise the ceiling no one will loan us money. this week people put a ten-year treasury bonds and government had to promise to pay them back in ten years a promise plus 3.3% interest. people trust to get paid back. in 1981 they had to pay 15% interest. so are investors all stupid? they are betting their own money.

i think they are smarter than the politicians. do they know that the 2 trillion dollars in tax dollars are coming in? they'll probably get paid or take a small hair cut. not raising the debt ceiling is no crisis. i worry if congress keeps spending wait it is. you said it's important for them to raise the ceiling. >> my concern is you hand over to the president what bills to pay. i'm not sure i like that power in the executive branch. i would like to see us not raise taxes and cut as much spending as possible while increasing the debt ceiling. i would keep the pot a short leash and come back and demand more spending cuts. >> john: i don't see how it gives the powers to the president? >> then the president gets to decide what bills to pay and not bills to pay. he'll decide. something tells me acorn gets pay paid a.

all the things that you and i irrelevant parts of government, they get paid first. >> john: he only has two-thirds of money, he would have to cut. >> he would blame everybody but himself. >> john: and scott asks, why is no one producing a plan that has any immediate cuts? we need to cut next year, not over ten years. >> one of the reasons is because there is a constituency for every one of these problems. essentially you that is problem with spending. as you spend and buy into programs you create constituency. nobody wants to take that political heat. >> john: in today's paper, there is a story about the essential air service to these little airports, where wealthy people like me vacation and you get cheap flights to keep the

airport open. they can't get rid of it, even in time of so-called crisis. >> they are not trying to cut spending because the president is still trying to talk us into tax increases, once we convince them not raising taxes and then we focus on spending. we should focus on the stupid stuff but the big savings is making small changes over the next 30 years make significant savings in the entitlement program. >> john: and you have been an optimist about this. i'm a pessimist. >> i'm a long term optimist. >> i would say i'm a long term optimist because i believe one of the ways out of this is by restraining spending to get the economy going again. eventually we will grow our way out of this and not spend our way out of this -- we hope. >> john: we certainly need growth to do it.

thank you steve and grover. coming up, i'll show you, i can cut the budget so there is no debt crisis. it can be done. premiering the revolution by lg. the newest release with verizon 4g lte. the first phone pre-loaded with access to netflix's massive movie library. powered by verizon 4g lte for an unparalleled streaming experience. see how mobile entertainment was meant to be seen. only with verizon 4g lte. now get the revolution by lg for $199.99 and receive 3 months of netflix free.

>> john: we taxpayers must be suckers, we gave the politicians more than 2 trillion dollars and then they say, that is not enough? they have to spent $3.8 trillion. give me a break. the end of the clinton administration, america spent half of that the bush and obama doubled our spending. they should apologize instead of asking for more debt. $3.8 trillion will get worse if my baby boom generation retires because politicians have promised to pay health care and social security and we're living longer. it's unsustainable. the only hope is not to borrow more but to cut spending and grow our way out of debt. we can do that because the government does all sorts of things it doesn't need to do. i can balance the budget.

i will. i do it right now. you need the right tools. we should get rid of all earmarks. privatize air traffic control. canada did that. we should sell amtrak. government can't run trains efficiently. we should end subsidies for public broadcasting and federal flood insurance and open anwr to drilling. and so far i've saved a lot but we need to do more. eliminate whole departments, starting with the education department. they haven't improved education. children gain nothing when your known is shifted to washington and shifted back with strings attached. kill the agriculture subsidies and while we're at it, let's keep welfare and food stamps but dump most of the department of

agriculture. kill the commerce department, most of the energy department. privatize nasa and end the war on drugs. we've cut $1.7 trillion. that is still not enough. to balance the budget we have to cut the so-called untouchable parts like social security. cato's plan to raise benefits would save $73 billion, to start. but let's go further, i agree richer people who not going to expect until 80 we shouldn't get more money out of social security than we put in. we should take the chainsaw to government handouts. department of health and human services runs 400 separate subs dead programs. it's crazy. now defense, we currently spend more than $700 billion.

we must support troops but we can do that and save money if the administration shrank the military's mission to most important role, protecting us and our borders. today we stationed 50,000 soldiers in germany, 9,000 in britain. let those countries pay for their own defense. we should cut 470 bye from defense and spend more than twice what china spends or the next largest military. so... we go quickly to capitol hill. join boehner speaker of the house. >> it's a reasonable response, to get our economy moving again and get americans back to work. the only thing standing in the way of the house proposal over in the senate is the president

and senator reid. it's time for them to tell us what they are for. time to tell us how they are going to get us out of the cul-de-sac they have given our country in to. we are hoping we will hear from them soon about their plan for how we end this crisis. >> i don't want to linger too long on the spectacle going on in the senate but it's worth noting you have the majority refusing to accept a vote on their own proposal. we know the reid proposal will not pass the senate. we know it will not pass the house. my view is we ought to end that charade and get serious. in that category i have spoken to the president and vice president within the last hour. we are now fully engaged the speaker and i with one person in

america out of 3 out of people that can sign a bill into law that we can get an agreement in v the very near future and resolve this crisis in the best interests of the american people. >> mr. speaker, the chairman of joint chiefs of staff is in afghanistan hoochbd and he was asked by a number of soldiers whether they are going to get their checks next week. how can you allow these soldiers to wonder if they going to get paid? >> i think senator mcconnell and you are both confident we are going to be able to come to some agreement with the white house and end this impasse. >> it was a bipartisan agreement next-door. >> we could have passed this bill early this week. it was a bipartisan agreement

between myself and the senate leaders to move the underlying bill to be moved through the house yesterday. the president all he had to do was say yes. that would have moved quickly through the house and senate. so we wasted a week that we didn't need to waste. now, we've been driven into this cul-de-sac and it's time for the president to decide how we're going to get out of it. what gives you confidence. >> in spite of our differences we're dealing with a reasonable responsible people that want the crisis to end as soon as possible. >> let me add, our country is not going to default for the first time in history. that is not going to happen. we now have a level of sio